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Reverse Mortgage FAQs

By Hilary Gibson, Staff Writer

(Page 3 of 4)  

What Is the Service Fee Set-Aside?

Under the FHA HECM program, you are charged a monthly servicing fee that ranges from $30-$35 to manage your account once the loan closes. The SFSA is an estimate of what the total servicing fees will be over the life of the loan, by multiplying your life expectancy (converted from years into months) multiplied by either $30 or $35.

Although it's not considered a closing cost, the SFSA can equal several thousand dollars, which is deducted from your available loan proceeds. You do not have access to that money, nor do you earn interest. 

Will I Lose My Government Assistance If I Get a Reverse Mortgage?

A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid, any reverse mortgage proceeds that you receive must be used immediately. Funds that you retain would count as an asset and could impact Medicaid eligibility. For example, if you receive $4,000 in a lump sum for home repairs and spend it all the same calendar month, everything is fine. Any residual funds remaining in your bank account the following month would count as an asset. If the total liquid resources (including other bank funds and savings bonds) exceed $2,000 for an individual or $3,000 for a couple, you would be ineligible for Medicaid. To be safe, you should contact the local Area Agency on Aging or a Medicaid expert.

Why Do I Need to Get Counseling?

Counseling is one of the most important consumer protections built into the program. It requires an independent third-party to make sure you understand the program, and review alternative options, before you apply for a reverse mortgage.

 

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